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 1. News
 2. Australian Housing Market


STAMP DUTY REFORM: THE STATES AND TERRITORIES LEADING THE WAY

Benn Dorrington

First published 8 Nov 2023, 10:37am

Stamp duty remains a major drag on home buying in Australia, but some states and
territories are making moves to reform this outdated tax.  

Stamp duty is a big revenue raiser for governments, however it’s also a major
hurdle for first-home buyers already struggling to save enough for a home
deposit.  

The tax also influences existing homeowners when they’re looking to upsize or
downsize, delaying or restricting the number of homes that are able to come onto
the market. 

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The problem with stamp duty

02:43


As home prices rise and housing affordability declines, calls have been growing
ever louder for governments to replace hefty, up-front stamp duty costs with
smaller and more incremental land taxes. 

President of the Real Estate Institute of Australia, Hayden Groves, says stamp
duty remains a major hurdle to first-home buyers, those wanting to move around
the country or invest in much-needed rental supply.  

While most states and territories offer stamp duty rebates for first-home
buyers, Mr Groves said the decision by NSW to add existing homes to its stamp
duty exemptions was a welcome change, given some states only applied concessions
and waivers to new homes or vacant land. 

“However, more needs to be done with the implementation of a deferred stamp duty
payment option that works like a ‘HELP’ (HECS) debt is a necessary reform that
would free up property markets across Australia,” he said. 

Replacing stamp duty with a land tax would boost housing supply by freeing up
more homes for sale. Picture: Getty

--------------------------------------------------------------------------------

“NSW and ACT have implemented a version of this model, but both have adopted an
approach that saw either huge increases in land taxes or a deferral of stamp
duty that follows the property not the individual, further distorting the
market.” 



Following its election this year, NSW Labor scrapped the previous government's
stamp duty reforms for future homeowners, which gave first-home buyers the
option to pay stamp duty or an ongoing annual land tax when they purchased a
property.

Instead, NSW Labor leader Chris Minns lifted the purchase price threshold for
first-home buyer stamp duty exemptions from $650,000 to $800,000, and
concessions from $800,000 to $1 million.


ACT THE 'STANDOUT' IN STAMP DUTY REFORM

Having started a 20-year journey to phase out the tax in 2012, the ACT has been
leading the way in stamp duty reform.

The territory has been slowly phasing out stamp duty while raising council
rates, as part of a two-decade process to make it as equitable as possible for
residents. 

Last month, the ACT government took another step in that journey after expanding
the stamp duty exemption to include dual occupancies and encourage homeowners to
build a second home on their properties.  

Proptrack senior economist Angus Moore said the ACT was the standout leader in
replacing stamp duty with a broad-based land tax. 




“It’s easier for the ACT because it’s a combined state and local government, so
they don’t have that split between the state taxes and council rates,” he said.
 

“But the model is certainly one that other states could consider. The 20-year
transition is a long time, but it has helped bring stamp duty burdens down
pretty significantly in the ACT compared to where they otherwise would have
been.” 

Mr Moore said Victoria was also making in-roads on stamp duty reform, however
not in the residential space.  


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The ACT has been leading the way on stamp duty reform in Australia. Picture:
Getty

--------------------------------------------------------------------------------

Earlier this year, the Victorian government announced plans starting from next
year to abolish stamp duty for commercial and industrial property.  

From 1 July 2024, buyers of these types of properties will have the option to
make a one-time stamp duty payment or pay it annually over a 10-year period. 

“It’s a different model to what we’ve seen elsewhere and it’s an attractive way
to undertake that transition,” Mr Moore said.  


WHY REFORM IS SO HARD

Governments fear that replacing large, upfront stamp duty payments with smaller
ongoing land tax payments will lead to holes in funding during the changeover
period.  

"For a tax that was supposed to be abolished with the commencement of the GST,
state and territory governments revenue take from stamp duty is 10-30% of total
revenues,” Mr Groves said.  

While stamp duty reform is challenging, the benefits would go a long way to
addressing Australia’s housing crisis.  

NSW Premier Chris Minns scrapped the land tax option for future homeowners in
the state. Picture: NewsWire / Monique Harmer

--------------------------------------------------------------------------------

If stamp duty was reformed, the REIA estimates property listings would increase
between 5-40%, depending on the jurisdiction, freeing up supply and easing the
current housing shortage. 

It says it would also provide governments with a more stable source of revenue
that doesn't fluctuate as much, given the volatility of the housing market. 

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